Fraud had Aussie worried about commission

When an Aussie Home Loans customer called the company in distress over a fraud committed by her broker the reaction of a staff member was to ask how her commission would be affected.

The company cut ties with broker Shiv Sahay in 2013 after it was revealed he submitted fraudulent documents to secure home loans for customers, for which he was later convicted.

The banking royal commission heard on Thursday that Sahay's customers were kept in the dark, even when one called the company "extremely stressed" over threats she could be charged over the faked loan documents.

"I know this isn't the best timing with what has happened, but will this affect the commission paid on the file as Simon advised it was transferred to me and would take effect post settlement," the staffer who took that call said, in an email to a colleague where she outlined the customer's concerns.

Senior counsel assisting the commission Rowena Orr quizzed Lynda Harris, an Aussie general manager, on why the customer hadn't been told Sahay was responsible for the fraud and was instead led to believe it was a bank error.

"That was the process then," Ms Harris said, adding she disagreed with it now.

She also denied Ms Orr's suggestion the Commonwealth Bank subsidiary was working hard to avoid lenders cutting the trailing commission on Sahay's $70 million loan book.

Ms Harris said the commissions would continue if Aussie continued to "look after the customer".

CBA's home buying general manager Daniel Huggins was earlier quizzed about broker commissions, after nothing had changed a year after the bank admitted they could lead to bad deals for customers.

Mr Huggins said a unilateral move by CBA to pay a flat rate fee to brokers for securing loans - rather than commissions that grow based on bigger loans - would be bad for business.

"There's a first-mover problem in that the person who moved first would lose a lot of volume," he said.

"It would need to be done on a uniform basis, otherwise what is a very important business to the CBA could be very substantially damaged."

He also revealed plans to cull inactive mortgage brokers backfired and ended with people thinking it was a plan to secure the bank more business.

Last year the bank de-accredited 710 of its 13,500 brokers as part a wider plan to cancel as many as 3500 accreditations.

But Mr Huggins said that stopped after feedback from brokers, the industry and media speculated CBA just wanted those brokers to write them more loans, which wasn't the intention.